Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Is Krispy Kreme Stock Getting Stale?

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Let me start out by saying that I love Krispy Kreme (NYSE: KKD  ) doughnuts. If I lived closer to a location, I'd rig up a webcam to watch for the lit "Hot Now" sign, and bolt out the door whenever I saw it. I'd also weigh just short of a half-ton. Apparently not everyone is as infatuated as I am, though. Wall Street analysis firm Wedbush just downgraded the baker from outperform to neutral.

The analyst on the case argued that the company has seen all of its big returns under its current setup, and that in order to push out further, it needs to expand its U.S. franchise footprint. The call was based, at least partially, on the near doubling of the stock over the last six months. The downgrade pulled Krispy Kreme back over 7% on the day.

Domestic tummyache
As of February, 19% of Krispy Kreme's locations were domestic franchise locations -- 142 of 748. Those locations have been very profitable for the company, and comparable sales increased 10% at the franchise locations in the last quarter. As a result, investors are looking to those locations to continue to fuel the growth that the company has been riding recently.

It's natural to compare Krispy Kreme's position to Dunkin' Brands' (NASDAQ: DNKN  ) Dunkin' Donuts concept. Last year, Dunkin' added 291 new franchise locations last year, with 149 of those coming in the fourth quarter. That's the competition that Krispy Kreme is facing, and if it doesn't keep up the pace, Dunkin' is simply going to soar past.

The good news
It's not all doom and gloom, though. Krispy Kreme is clearly doing something right, and even a 7% fall isn't going to make this a bad investment. This year is going to be slower, though, make no mistake. The company is planning to open 10 to 15 U.S. franchise locations, and is hoping for single-digit comparable sales increases.

Looking again to Dunkin', it's hoping to put another 330 to 360 locations in the U.S. in the coming year. Some of those will be company-owned, but the difference in scale is still staggering. Dunkin' is also going to be pushing its coffee line for extra growth this year, something that Krispy Kreme hasn't had the opportunity to take advantage of yet.

Coffee is likely coming to Krispy Kreme, though, and depending on how well it catches on, it could make up for some of the growth that a smaller U.S. expansion leaves on the table. I'll be watching both Krispy Kreme and Dunkin' Donuts closely over the next year to see how the whole thing falls out. Also, I'll be eating doughnuts and drinking coffee -- you should be, too.

And speaking of coffee...
With Green Mountain Coffee Roasters as cheap as it's ever been, many investors are wondering whether this is the end of the former market darling, or the perfect entry point for an enormous rebound. You can find our recommendation for how to play the company in our premium research report. In it you'll find everything you need to know about Green Mountain, including whether it's a buy at today's prices. Click here for instant access.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2373233, ~/Articles/ArticleHandler.aspx, 10/1/2016 1:27:24 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 4 hours ago Sponsored by:
DOW 18,308.15 164.70 0.91%
S&P 500 2,168.27 17.14 0.80%
NASD 5,312.00 42.85 0.81%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
KKD $0.00 Down +0.00 +0.00%
Krispy Kreme Dough… CAPS Rating: **
DNKN $52.08 Up +1.40 +2.76%
Dunkin' Brands Gro… CAPS Rating: ***